Greetings, and welcome to the Solgel Investor Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. During today's conference call will be recorded. As a reminder, this conference is being recorded.
I would now like to turn this conference over to your host, Mr. Alain Sirilevi, CEO of Solgel. Thank you, sir. You may begin.
Thank you, operator, and hello, everybody, and thank you for joining us on such a short notice. Together with me is our Executive Chairman, Mr. Moe are welcome. Our CFO, Mr. Gilad Mamlok and our VP of Clinical and Regulatory Affairs, Doctor.
Ofer Levy Hakan. This morning, we informed about 2 exciting advancements we have made, are signing of a strategic partnership with Galderma regarding commercialization of Epsilon-twenty in the United States and new pipeline findings and their implications for our future development plans that are in line with our vision to transform into are the leading topical dermatology company. But before further discuss these two advancements, I will be conducting a discussion of the note on forward looking statements. The cornerstone of our strategic partnership with Galderma is the innovation behind Epsilon Twino and the strong clinical results obtained for both assets. We are proud that Galderma has recognized The advantages of Epsilon Twin Air and their importance for rosacea in acne patients and delighted that following this partnership, Epsilon Twin Air will have the potential to become the next key rotation and acne market brand in the United States.
GADERMA is the world's largest independent dermatology company.
It has been the U. S.
And are in the market leader for many years, achieving nearly $350,000,000 in pig sales for epidural and acne and nearly $200,000,000 in pig sales for cilantro in rosacea. We therefore identified GADERMA as our preferred are a strategic partner for making Epsilon TwinEO available to as many rosacea and acne patients as possible in the United States and for maximizing the market potential of these two assets for the benefit of SolGel's stakeholders. According to our agreements with Galderma, Solgel will be entitled to receive up to $50,000,000 in upfront and product approval payments, assuming both products are approved by the end of this year. Soljel will also be entitled to mid to high teen percentage royalties of net sales and up to an additional $9,000,000 in Sales milestone payments. In addition, Soljell has the option to regain commercialization rights 5 years are following first commercialization, which we find very compelling as Epsilon, we know our patent protected until 2,040 2000 and 38 respectively, and we are pursuing additional patent applications for both programs.
We carefully consider the alternative of go alone and decided that given Payer's current approach and investments required to go alone that it would be more prudent to collaborate with a top tier well established dermatology company Rather than building our own marketing and sales force for only 2 drug products as good as they may be. We may have commercialized Epsilon Twin now ourselves in 5 years after their markets are well established and after our pipeline candidates mature. In the meantime, the capital we will gain from our partnership with Galderma and our partnership with Perrigone Generics will be used to advance our promising pipeline of innovative topical formulations of Flumilast, Kapinarov and erotenib It is now my pleasure to turn it over to our Executive Chairman, Mori Arkin.
Mori, please. Thank you, Alon. As the Executive Chairman of the Board to Soljel, It was extremely important for me to join you today to review our new strategic direction and to highlight This decision has been carefully considered and has the full support of our Board. On this call, I will not only discuss the partnership for our lead branded drugs, Epsilay and Truneo, but also our vision of Solgel moving forward, As we are now in a position to maximize the development of our assets while capturing a revenue stream from both our generic and branded product partners. Importantly, the structure of today's partnership announced with Gerdarma, a world leader in dermatology, Solgel will be a company with a robust portfolio with 2 established leading products in Acne and Rosacea with roughly 40% profit margin and 2, possibly 3 soon to be launched products targeting the large markets for psoriasis, atopic dermatitis and hyperkeratopic skin diseases, including 4 oflumilaz, topinorov and elotinib, each of which has promising potential.
If we are able to capitalize on this opportunity, will be a stronger company, whether as a standalone company or as an independent division within a larger entity. Although a number of large pharmaceutical companies have moved into biologics, we expect topical therapy to continue to be the backbone of skin therapy for these complex diseases. It is therefore our goal to fill the gap that was created by big pharma abandoning are in the range of topical R and D and within 5 years become topical innovators and the leading topical dermatology company. If our plan remains on track, we expect to realize significant value for both patients and shareholders. Because these programs because the programs that we are focusing on utilize active pharmaceutical ingredients that have already demonstrated efficacy in 3rd party Phase III trials, we believe that our new programs have the potential for success are in markets that offer high economic potential.
To be clear, we believe these are not
are in the range of additional risky Phase
1 assets, but pipeline programs that warrant significantly higher valuations. Are extremely energized and excited by this development. But first, let us explain why we decided to pivot and partner our lead are in the range of blended products, candidates, Epsilay and Truneo. Because we are always seeking ways to maximize shareholders' value, We carefully evaluated the number of options with respect to our branded products in our early stage pipeline. We collectively decided that this opportunity with Galderma represents the most attractive path.
It permits our branded medications in Africa and North Asia to be promoted by the strongest dermatology sales force in the industry with deep prescribing relationship. We believe that Galderma, which is exclusively focused on dermatology, has the best ability to optimize our brand's future growth in the Q1 of 2019 will be a strong year for the full year. This decision also expedites our path to profitability By conserving marketing expenditure, while we benefit from after payment and sales royalties. Finally, It gives us the bandwidth to focus on developing other promising pipeline projects like novel formulation of Oflumilaz enter Pinoof in the high value topical market of psoriasis and atopic dermatitis. We believe that these compounds represent are in the process of attracting the intellectual property strategy for each of these programs.
Thanks to the enormous efforts of Doctor. Alon Serene Levy and Mr. Dheerad Mamlok. We have reached an agreement announced today with Galderma that provides us with the best of all worlds. As we previously indicated, the main compounds that we are developing are topical of Flumilas, SGT-five ten, topical tapilor, are in the range of $1,000,000 and toplodolaryolotinib, dollars SGT 210.
We said in our release today In the second half of the decade, we aim to become the leading player in the ofluidosis survival market, which is focused by and analysts to reach approximately $1,000,000,000 in 20.28. The atopic dermatitis market similarly represent another $1,000,000,000 opportunity. By the end of 2022, we expect to have a head to head data against the formulation of O.3 of lumascreen that we believe will be a very close approximation of the soon to be launched Proflumias brand. We hope that this comparative study will highlight the unique features of our formulations and expect to initiate Phase 2 work in Ofumiras shortly thereafter need to realize an inflection in value from this program. With respect to our FLUMLESS trial, We are extremely pleased with the highly encouraging results from a recent preclinical study using a validated psoriasis model have been used to predict efficacy for market that provides this drug such as apremilas, Otezla and several injectable biologics.
What is unique about testing with this model is that drugs are tested on living human psoriatic skin, and therefore results are expected to mimic the clinical effect in humans. In this experiment, we tested our proprietary formulation for Fumilaz are in comparison to a 0.3 fluid formulation of formulas created by Solgel, are each dosed once daily for 2 weeks. We also employed a positive control of the topical steroid, have been given twice daily, which we know rapidly counts inflammation as well as a negative vehicle control. In this study, 6 out of 10 or 60 percent of the animals treated with our Fluorias formulation recovered compared to 3 out of 10 or 30% in the animals treated with the Oflomida screen. Make note, this is not a spurious findings.
Despite the small number of elements treated, because the study was designed based on the predefined hypothesis with our formulation will be superior to the cream. These results were further supported by histological findings. As a result, we intend to advance our innovative STP-five ten formulation to clinical studies by the middle of next year. Are now ready to begin. Shifting gears, TAPINAROFT is another product that has comparable market potential, and therefore, we are equally excited about this product candidates.
Our enthusiasm stems from our expectation to be the only player besides the brand in the U. S. And the rest of the world for a number of years offering innovative formulation or combinations and increased patient access. In those markets where it would make sense to offer the product also in an unbranded form, we will do so via partnership with the competing players. If our trials are successful, our regulatory strategy to develop our formulation of stapinav will consist are filing a new drug application or NDA via the 505b1 pathway.
We took into
consideration The 55(1) regulatory pathway is more demanding and more costly than the 55(2) regulatory pathway. However, The latter pathway is associated with the Hatch Waxman 30 month day, which we prefer to avoid. The 505(1) route will enable us early entry into most of the attractive markets in the world As all these markets have a data exclusivity policy, which prohibits a company from entering the market for a period of up to 11 years Unless you have full registration package that was internally developed. It can also provide us with a durable patent protection product can be marketed alongside other tapenol formulations as well as monetized to potential partners. We're extremely committed to this project and have already dedicated resources to its advancement.
Our first initiative has been to develop a GMP compliant are in the company's Pharmaceutical Ingredients or API of Staphylorov to meet FDA standards by partnering with a reputable API manufacturer, Wavelet Pharmaceuticals, which is well known in the field for its stellar track record FDA GMP compliance. This is an important milestone for us, which will move a major hurdle to clinical trial developments. We are now full steam ahead with both clinical projects. In summary, we are extremely galvanized by this turn of events and our stronger than ever strategic position. Will start a deal with the loan leading global dermatology company to monetize our late stage products In a way that preserves financial upside for the long term and conserves cash in the near term.
This partnership also permits us to focus on scientific efforts on innovative high value products that will drive upside for our shareholders. We have also carefully mapped our regulatory and legal are in the range of 2nd largest companies. Connected by our strong science and innovation, it It is our aim to be a leader in the topical dermatology field in the end of this decade by the end of this decade. Will be joined. I will now turn the call to Gilad.
Gilad? Thank you, Mauricio.
At the end of May of this year, we had $42,100,000 in are in the range of cash investments. We estimate that our cash resources will enable funding with operational and capital expenditure requirements into the Q1 of 2023, are assuming FDA approval of both Vynaeo and Exellet in 2021. This estimate excludes any sales milestone or royalty payments that you may receive will now turn it over to the operator for Q and A.
At this then will be conducting a question and answer session. A confirmation our first question comes from the line of Elliot Wilbur with Raymond James. You may proceed with your question.
Are in the line with the line of Galderma and the progress on your pipeline. I guess, my first question is with respect to the Galderma licensing agreement. Obviously, it's The company to partner with in the dermatology space, clearly the leader in the category, But they also have a lot of products. So can you just give us some sense of how the licensing agreement incorporates or embeds various performance obligations in terms of sales and marketing spend or have a minimum level of details and how are TONEEO and Epsil A going to be positioned against some of Galderma's existing products, mainly Epidio Forte, Aleph and Differin. Just curious as to how they're going to make room for these attractive assets within a fairly large derm portfolio.
Let me answer it. We will start the answer and then will follow. What we have to remember that right now, Condemn does not have so many products, Because both Epidural and Solantra, the 2 leading products, that paid the bills for the last years are now genericized. It makes no sense to develop to market it. So our 2 products came are very sharp on the area where they are lacking the new retinoid cannot become an alternative To Epiduo, I did not perceive so in the market.
So the 2 products that we are offering What is the products that they need? They need a replacement for Cylantra, which was up to $200,000,000 and they got Epsilon. And they needed a replacement to epidural, and they got TWINO. So will feel and that's why they were eager to have it and were excited about the opportunity. So because of this complementarity, we feel very confident that they will pursue this business because they can do it relatively easily because of the contacts and the lack of a competitive product are in the very same category.
So that's what made this deal so valuable are for both parties. For the specific numbers regarding sales minimum, We do not disclose the numbers, but certainly we took care of that also.
Okay. And then I had a follow-up as well unless Juan was going Add additional commentary there?
Yes. Glad, please. Could you repeat just the question, the follow-up question?
Sure. Well, let me ask the follow-up question then. Just moving beyond the promotion and just looking at The rights to get back the products in 5 years Seems to be obviously quite an attractive option. Any financial payment associated with those rights in order to reacquire? No, there is no financial commitment.
We can get it back after 5 years. We have got to get it back after 5 years. There is no cost to that.
Okay. And then just one last question here and I'll get back in the queue. So on riflumabst, You mentioned the regulatory pathway here and went into a lot of detail about kind of why you chose to or How you're proceeding and using the 505(1) pathway. Just wondering The B1 pathway versus the B2, how much longer do you think that will take in terms of The development pathway, and then just curious, obviously, the B1 may circumvent some IP that's out there, but There's still the possibility of commencing litigation against the Solgel formulation once The product is proved and commercialized. So I'm just wondering kind of how you were thinking about that alternative versus Pursuing the 505(2) which forces litigation at kind of much earlier point under Hatch Waxman.
Let me put things in order. The 55b1 Strategy is for Tapina Rolf. And in the case of Rulasta, we are going to use the 505(2) are out. Only we will refer to the oral product of rubilast, So that also in this case, we will avoid the PAGR for litigation. So 5b1 is tepinomol.
Now you asked several good questions. We have already started the development of Topinoroz, and it is our expectation to reach the mark are not later than 5 years from the launch of the brand. This means that if I take, for example, United States, Well, practically, if you have a new chemical entity, a pediatric exclusivity and the 30 month stay that starts About 3 months after you have submitted because you have to write to them and they have to write and sue you back, plus the appeal, plus the appeal on appeal. It is rarely less than 10 years that one can maintain exclusivity When a company has a new chemical entity as Tapanoff is. So by resulting to a route That will require only 5 years from the launch of the brand.
We are going to have 5 years of exclusivity in the United States market. Now if we assume that the market is between $500,000,000 or $1,000,000,000 By 2028, roughly similar to Flumilast, we are talking about huge potential for ourselves, Both as a brand and also as an unbranded product, We started discussions with companies, and everyone Is very excited about this possibility. So the value is at least 5 years of exclusivity in the United States, 6 or maybe more in Europe because there, they have the 11 years Of data exclusivity, if you will. So we are talking about a huge benefit that will translate to 100 of 1,000,000 of dollars. The cost will be higher, but in our models, again, which are based on the forecast of the analysts.
If they are right, we will reach breakeven very, very soon, very, very soon after launch, maybe 2 Yes or something. And now your question about patents, we study Every patent of dermapland and every patent of Acutis very, very thoroughly. We have several Legal advisers and we are confident that our product We're not infringed in any shape or form the patents of Each of these two companies, let's now talk about Tapanarol. Yes, they can sue us, but We are not afraid from sham suits if they are not connected come if they don't come together with 30 months stay. Any suit will be any litigation will be a shame litigation.
We are not afraid of shamed the litigations. We are worried about litigations require that come with 3, 4, 5 years of stay. So we are confident. We know the patents. We know the We know the comments from the Patent Office.
We are very confident in some of our legal consultants that we are not going to infringe any patent.
Okay. Thank you. Appreciate the responses.
Our next question comes from the line of Gary Mackman with BMO Capital Markets. You may proceed with your question.
Are open. It's Evan Hua filling in for Gary Nachman. Congratulations on the partnership and the pipeline updates. So my first question, I think you mentioned that SGT-three ten, you already filed NDA to the FDA, when do you expect to receive a potential approval for that product?
No. 310 was not none of the 3 products were filed, not at all.
We submitted the NDA for Epsilon 3 now, but not For the products that are mentioned in our press release regarding pipelines. 210, 310, 510, have submitted an NDA for them.
Got it. Yes. Thank you for clearing that up. So then I have another question regarding Esolette. Has there been any updates regarding The pre approval inspection for that facility, has there been further discussions with FDA around that?
Yes. So we approached the FDA, but we have not received any response yet regarding When and how they are going to conduct the pre COVID inspection.
Got it. And then my last question, Can you provide some more color around for SGP-one hundred and fifty, can you provide some more color around the timeline to approval? When do you expect to meet with the FDA regarding the 505(2) pathway product?
Would you please like to take the number SGT 510, you mean?
Yes, yes,
sorry. 5 10.
As I said, there are 2 routes and each route will have its own We will approach FDA, I guess, by the beginning of 2020, please.
The first pre IND meeting in order to initiate safety study will take place in 2020 will be for the 505(2) and NDA submission is estimated to be submitted
are in 2026.
Got it. Yes. Thank you.
Are ready to begin.
Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Mr. Alain Sarilevi for closing remarks.
Thank you very much, operator. I would like to take the opportunity and to thank Solgel's excellent employees for making the achievements we announced today feasible and to thank you all for joining us this morning. Thank you. Operator?
Thank you for joining us today. This concludes today's conference. You may disconnect your lines at this time.